Apple CEO Tim Cook may be required to testify in an antitrust lawsuit the United States Department of Justice filed against it and major e-book publishers over an alleged price fixing of e-books. Cook’s eventual testimony might be risky and could be potentially damaging to his company, now the main target of the suit after all named publishers had settled with regulators.
On the other hand, the CEO could take the opportunity to make a public case for a so-called agency model that the government claims has had anti-competitive impact. The agency model regulates the relationship between Apple and digital content owners who get to pick their iBook prices freely as long as they agree not to offer lower pricing to competitors than they do to Apple.
Business-wise, publishers prefer Apple’s policy over Amazon’s wholesale model where the online retailer sets prices as it sees fit, often hurting publishers’ bottom line by engaging in selling books at a loss just to draw shoppers to its online store…
Bloomberg reports that Cook’s possible testimony was disclosed yesterday in a brief order by U.S. District Judge Denise Cote in Manhattan, who is overseeing the case.
In a three-sentence order, Cote set a telephone conference for March 13 after the U.S. asked her in a letter on March 6 for “assistance in settling a discovery dispute” with Cupertino, California-based Apple over Cook’s deposition. The March 6 letter wasn’t part of the publicly available court file.
As you know, DoJ alleges Apple conspired with major e-book publishers to fix prices on the iBookstore by demanding they don’t undercut iBookstore pricing on competing stores. Publishers who agreed to Apple’s policy simply raised e-book prices on Amazon, prompting DoJ to intervene and file an antitrust lawsuit in April 2012.
The government settled in September 2012 with three of the nation’s top five book publishers, HarperCollins, Simon & Schuster and Hachette. It didn’t help that the iPhone maker publicly accused Amazon of assisting the government’s agenda: last December, DoJ settled with the publisher Penguin and last month announced a similar settlement with Macmillan, leaving Apple as a lone holdout in the lawsuit.
In a prepared statement, DoJ pledged to “continue to litigate against Apple for conspiring with Macmillan and four of the other largest U.S. book publishers to raise e-book prices to consumers.”
The trial against Apple is scheduled to begin in June 2013. The European Union ended its antitrust probe into Apple’s e-book pricing terms in December 2012 after Apple had offered concessions to appease regulators.
Per fresh stats Apple released last week, the iBooks app has been downloaded 130 million times worldwide. And just last week, Apple rolled out paid e-books on its iBookstore in Japan, with popular local content including popular manga graphical novels, but also fiction, light novels and other content.
Independent analyst Horace Dediu pegged the iBooks revenue at about $1.8 billion assuming a conservative $9 average selling iBook price (many best sellers are $13 or $14) and assuming a 70 percent share for the publisher. The pie chart above shows the download rate of books relative to apps and songs.
Per Apple, it sold 130 million and 400 million iBooks as of June 2011 and October 2012, respectively. In other words, the company moved some 270 million iBooks in 16 months, amounting to an average of 17 million iBooks each month. The iBookstore has an estimated share of the worldwide e-book unit sales of about 24 percent.